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tv   Federal Reserve Announces Quarter- Point Rate Hike  CSPAN  June 17, 2017 7:01pm-8:01pm EDT

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journal," live with news and policy issues that impact you. former house speaker ingrid talks about his -- newt gingrich talks about his new book. and humane society president and "theiscusses his book, humane economy," how consumers are transforming the lives of animals. and the book "the retreat of western liberalism" describing what the change in our culture means for western values. be sure to watch c-span's washington journal live 7:00 a.m. join the discussion. >> earlier this week federal reserve chair janet yellen announced an increase in the short-term interest rate by 0.25%. that is the second rate hike in 2017. she discussed inflation and how
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she expects it to stabilize around 2% over the next few years. this is one hour. >> good afternoon, before i get started, i want to say that our thoughts are with those who are injured this morning. today, the federal open market committee decided to raise the target range of the federal fund rate by one quarter percentage point, bringing it to one to one quarter percent. our decision reflects the progress the economy has made and is expected to make toward maximum employment and price stability objectives that's science to us by law. we also released today an addendum to policy normalization principles and plans and , additional information on the process that we'll follow in normalizing the size of our balance sheet once we determine it is appropriate to do so.
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i will have more to say of our interest rate decision and our balance sheet policy. first, i will review recent economic developments and the outlook. following a slow down in the first quarter, economic growth appears to free bounded and of a moderate growth so far this year. household spending, which was particularly soft this year was supported by solid fundamentals, business investments which was weak from much of last year has continued to expand and exports showing greater strengths this year in part reflecting pick up of global roetgrowth. -- global growth. we continue to expect that the economy will expand at a moderate case of the next few
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years. in the labor market job gains average of 160,000 per month since the start of the year. a solid rate of growth that although a little slower than last year, remains well above estimated pace necessary to absorb new entrance to the labor force. current rate has fallen about a half percentage point since the beginning of the year and with 4.3% in may. a low level by historical standards and modestly below the medium of fomc participants estimates of its longer level. of labor market utilization have improved this year. participation in the labor force has been little changed for about three years. given the underlying downward trend in participation, stemming largely from the aging of the
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u.s. population relatively steady participation rate is a further sign of improving conditions of the labor market. looking ahead, we expect that the job market will strengthen somewhat further. turning to inflation, the twelve months changed and price index for expenditure was 1.7% in april. that is up from less than 1% last summer, but down somewhat over the past few months. core inflation which excludes the volatile food and energy categories and better indicator of future inflation has also inched lower. inflation haveon been driven significantly by what appears to be one of production in certain categories of prices such as wireless telephone services and
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prescription drugs. these price declines will as a matter of arithmetic restream of that 12 much -- twelve-month inflation figures until the low mark readings drop out of the calculations. however, with employment near the maximum sustainable level, the market continuing to strengthen, the committee expects inflation to move up and stabilize around 2% of the next couple of years in line with our longer run objectives. nonetheless, in light of the softer readings, the committee is monitoring inflation developments closely. let me turn to the economic projections that committee participants submitted for this meeting. as always, participants condition their projections on their own individual views of
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appropriate monetary policy which in turn depends on each participant assessments of many factors that shape the outlook. the median projection for growth of inflation adjusted growth domestic product where real gdp is 2.2% this year, slightly 2019,n to 1.9% by slightly above its estimated longer run rate. the median projections for the unemployment rate stands at 4.3% of the fourth quarter this year and takes down to 4.2% of 2018 and 2019. modestly below the median estimate of its normal run rate. finally, the median inflation projection is 1.6% this year and rises to 2% in 2018 and 2019. compared with the projections made in march, real gdp growth is little change and
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unemployment rate follows a lower path and inflation although marked down this year for reasons i mentioned earlier is unchanged. median estimate of the longer run normal unemployment rate moves down a 10th to 4.6%. returning to monetary policy for the past year and a half, the fomc have been gradually increasing its target range for the federal fund rates as the economy is continuing to make progress towards our goal of maximum employment and price stability. our decision today continues this process. we continue to expect of the ongoing strengths of the economy will warrant gradual increases of funds rate to sustain a healthy labor market and stabilize inflation around our 2% longer run objectives. that's based on our view that
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the fund rate remains below our neutral level. the federalvel of funds rate that is neither expansionary nor contractionary and keeps the economy operating on an even keel. because the neutral rate is currently quite low by historic standards, the federal funds rate would not have to rise all that much further to get to a neutral policy stance. expect the neutral level of the federal funds rate to rise some what overtime, additional gradual rate hikes are likely to be appropriate over the next few years to sustain economic expansion. even so, the committee continues to anticipate that the longer run neutral level of the federal funds rate is likely to remain below levels that prevail in previous decades. this view is consistent with
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participant projections of monetary policies. the median projections of the federal fund rates is 1.4% at the end of this year and 2.1% of the end of next year and 2.9% at the end of 2019 in line of its estimated longer run value. compared with the projections made in march, the median path to the federal funds rate is essentially unchanged. as always, the economic outlook is highly uncertain and participants will adjust their assessments of the appropriate path of the federal funds rate in response to changes to their economic outlooks and views of the risks to their outlooks. as i have noted previously policy is not on a preset course. let me now turn to our balance sheet. as i noted in our statement, we are continuing to maintain the size of our balance sheet by reinvesting proceeds for
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securities and principle payments from agency debt and mortgage back securities. provided that the economy evolves broadly as the committee anticipates, we currently expect to begin implementing a balance sheet normalization program this year. consistent with the principles and plans, we release in 2014. this program would gradually decrease our reinvestment and initiate a gradual and decline of our security holdings. the addendum to our policy normalization principles in plans that we release today provides further information. for both treasury and agency securities we'll reinvest proceeds for holdings only to the extent that they exceed gradually rising caps on
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reductions of our security holdings. initially these caps will be set at relatively low levels. $6 billion per month treasuries and $4 billion per month in agencies. any proceeds exceeding those demands will be reinvested. these caps will gradually rise over the course of the year to maximum $30 billion per month for treasuries and $20 billion per month for agencies and securities and will remain in place through the normalization process. by limiting the volume of securities, the private investors will have to absorb as we reduce our holdings of against should guard outsized interest rates and other potential market strains. as i noted when our security holdings begin to gradually
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decline, so too will the supply of the reserve balances of the banking system. at some point down the road, the community will bring the decline of the balance sheet to an end as the quantity of reserves is normalized. i cannot tell you of the normal run of reserve balance will be because that'll depend on the committee's decisions about how to implement monetary policy most efficiently and effectively in the longer run as well as a number of as yet unknown elements including the banking system's future demands for reserves in various factors that may affect daily supply of reserves. what i can tell you is that we anticipate reducing reserve balances and overall balance sheet to level below those scenes in recent years but larger before the financial
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crisis. as readers of our minutes no, -- know the committee have discussed potential long run frameworks for implementing monetary policy. decisions about appropriate long run framework do not need to be made for quite some time and our future deliberations will benefit from the experience that we'll gain during the normalization process. at this point, i will just point out our current system is working well and has some important advantages. in particular it is simple and efficient to operate does not require active management of the supplier reserves and most importantly provides good control over the federal funds rate and effective transmission of changes in the federal funds rate to broader money market rates.
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because our current system is likely compatible with a much smaller quantity of reserves our plan for gradually reducing the balance sheet does not constrain our future's options for how to implement monetary policy. finally as noted in today's addendum, the committee affirmed changing the target range for the federal funds rate is our primary means of adjusting the stance of monetary policy. in other words, the balance sheet is not intended to be an active tool for monetary policy in normal times. however, the committee would be prepared to resume investments if a material deterioration in the economic outlook to warrant a sizable reduction in the federal funds rate. more generally the committee would be prepared to use its full range of tools, including
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altering the size and composition of its balance sheet, if future economic conditions were to warrant a more accommodating monitoring policy can be achieved solely by reducing the federal funds rate. thank you and i will be happy to take your questions. >> wall street journal. the principles that you released today say the balance sheet winds down should commence once interest rate normalization is well under way. with the latest rate increase, do you believe normalization is now well under way? >> that's something that we have said for some time and i have previously been i have been asked what well under way means, i said i don't want to define that in quantitative terms but
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in qualitative terms so there is no specific level of the federal funds rate that means we are well under way but it is also a question of not only the current level but our conference in the outlook and our projections for the future path of the federal funds rate. we have increased our federal funds rate target now several times. our outlook is that we anticipate further increases this year and next year for federal funds rate and our statement indicates that the economy continues to evolve in the manner that we expect that we would feel the conditions will be in place to begin this process this year.
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>> i am wondering if you have talked to the president or members of the staff of the possibility of staying on as chair for a second term. i am wondering if you would consider doing that, is it something that you thought doing and finally there are three vacancies on the feds from you -- do you have any comment for the president to nominate any positions? chair yellen: what i have said about my own situation in the intent to serve out my full term as chair, which ends in early february. i have not had conversations with the president about future plans. i do very much hope, i know that they have been working hard to identify appropriate nominees for the open slots and i do very much hope that there will be nominations in the not too this dim future and the senate will take those up expeditiously.
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i look forward to having a full board. >> do you desire to stay on? chair yellen: i really don't have anything for you at this point. i am from "the financial times." we have had a fairly long streak of weak inflation numbers by the cpi. expectations are declining. how does this interact with your would outlook, and further disappointments argue for rate hikes or delaying balance sheet runoffs? how do you think about those two potential responses to weak inflation? chair yellen: let me just say, as i emphasized in my statement, monetary policy is not on a preset course. we indicated in our statement
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today that we are closely monitoring inflation development and certainly, have taken note of the fact that there have been several weak readings, particularly on core inflation. our statement indicates that we expect inflation to remain low in the near term, but on the other hand, we continue to feel strong labor market and a labor market that is continuing to strengthen, the conditions are in place for inflation to move up. , we need toy monitor that very carefully and ensure, especially with roughly five years of inflation running % objective, that is a goal to which the committee is strongly committed and we need to make sure that we have in place the policies that are necessary to achieve 2%
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inflation and i pledge that we will do that, but let me say with respect to reason readings, it is important not to overreact to a few readings and data on inflation can be noisy. as i pointed out, there have factorse idiosyncratic i think that have held down inflation in recent months, particularly a huge decline in cell telephone service plan prices. some declines in prescription drugs. we had an exceptionally low march, on core pce in and that will continue to hold down 12 month changes until that meeting drops out. but we are, this morning's reading on the cti showed
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weakness in a number of categories. and it's certainly something that we will be closely monitoring in the months ahead. on making our policy decisions on the medium-term outlook. be we will you know, looking carefully at incoming data and as always, revising our outlook and policy plans as appropriate. >> [indiscernible] continue as: so, today's actions show to feel the economy is doing well, is showing resilience. we have a very strong labor market. an on implement rate that has declined to levels we have not seen since 2001. and even with some moderation in job growth, we have
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a labor market that continues to strengthen and policy remain accommodative. so, it's important that inflation move up to our 2% objective, as our projections show we continue to expect that and believe that the conditions are in place. but we will monitor incoming data, obviously, and be attentive to rethinking our outlook if it seems appropriate. >> i am from bloomberg news. labor the thbe point on inflation, but i was wondering, i hear a lot of the so-called niru, your conversation now and other committee members. it is an unobservable thing, at
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best it's an estimate. and the assumptions in there seem to me like the economy today is much like the economy yesterday, when, if anything, we've learned that the post-recession economy is vastly different than it was before the recession. i'm wondering, something you've talked about is to focus more on the change in inflation, actual inflation and is it going up or going down and basing policy more on that. what would be the risk of that, and why not adopt that if you have such a long period of underperformance? chair yellen: we are looking at the actual performance of inflation. and we are altering our views on the basis of discrepancies between what we see and our expectations. andw hil while it is very diffit to pin down the longer return normal rate of unemployment and there is a great deal of uncertainty about it and it is hard to pin down, especially given the fact that the so-called phillips curve appears
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to be quite flat, that means inflation does not respond very quickly to movements in unemployment. nevertheless, that relationship i believe remains at work. that operate historically. now, in the face of very low unemployment that we have seen, upe growth has picked somewhat, but it remains low. inflation is influenced by a number of different factors, but we certainly have not seen much, or any, evidence of upward pressure on inflation. the committeeat, has successfully moved down its estimate of the normal longer run rate of unemployment and in this projection, it's moved down to 4.6%, 1/10 lower than it was last time. unemployment
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rate is below that, it is not that much below it. >> i am from "the washington post." we saw measures of consumer rises based on tax cuts and infrastructure spending. some of those policy changes have been slower to materialize than initially expected. how do you view the positive and negative risks, from policy changes to your outlook, and has your view changed on the at all in the last six months? chair yellen: so, i would say that business and household sentiment remains quite strong, although many forecasters have pushed back somewhat on thet expectedf the policy changes, such as changes to tax policy or fiscal policy more generally. i would say that based on my observation of actual spending
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behavior and my discussions with our wide range of contacts, that i haven't seen very much evidence that thus far, expectations of policy changes have driven substantial changes in either consumer spending or investment spending. so, i really wouldn't expect any significant pullback. many of our business contacts, i think their confidence remains high. they have not really changed plans yet and they have a wait and see attitude. >> daniel appelbaum, "the new york times." measures of financial condition show that since the fed started raising interest rates two years ago, financial conditions have actually loosened. consumer business borrowing
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costs in many cases are down. do you have a sense that the market is not listening to you? how much of a concern is that for you? and at some point does it convince you that you need to raise rates perhaps more quickly? chair yellen: in deciding what the appropriate path of rates is, we take many different factors into account. we have certainly noticed the stock market is up considerably over the last year. that usually shows up in financial conditions indexes and is an important reason why some of them show is your financial conditions. there's been a modest decrease recently in the value of the dollar, although it is up substantially since mid 2014. so, we take those factors into account in the rising power forecasts -- account in deriving our forecasts and deciding the
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appropriate stance of policy. we have done that. but other things also affect the stance of policy. so there really can't be any simple relationship. we're not targeting financial conditions. we're trying to set a path of the federal funds rate, taking account of those factors and others that don't show up in the financial conditions index. we are trying to generate path for employment and inflation that meet our mandated objectives. >> i am from routers. on inflation again, what is the possibility that something more -- i mean, there are powers at work here, which is the weight of the central bank credibility for a generation really, plus globalization has pushed the world into a low-inflation environment that is going to be very hard to get wages and prices moving again. why not 3.8%?t,
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you've banked the quarter a full percentage point now, so there's no risk of falling behind whatever curve exists. why rush? thinkyellen: so, i don't central-bank credibility, at least the fed's credibility, has been impaired. we look at a whole variety of indicators of inflation expectations. professional forecasters, whether it's in the blue chip or the survey of professional forecasters, those expectations have remained quite steady and in close alignment with our 2% inflation target. tips-based measures of inflation compensation do not provide straight reads on market participants' estimates and expectations about inflation. they embody other elements, risk premia and liquidity premia as well.
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they had moved it down and now have moved -- they remain at low levels. but they've moved back up again. it is true that some household surveys of inflation expectations have moved down. but overall, i wouldn't say that we've seen broad undermining of inflation expectations. but you asked also i guess about structural changes, perhaps, have they impacted the inflation process. that certainly is possible. and estimates of the normal longer run unemployment rate, they are quite uncertain. i agree with your assessment there. we're really not certain what they are. and policy is not being -- is not based on some firmly-held preconceived notion.
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we're watching very carefully how the actual economy performs. and, you know, i continue to believe, though, that with job growth running well in excess, even with a moderation of the level that's needed to provide for new entrants in the labor market, we do have a strengthening economy, with policy accomadative, all we're doing in raising rates is removing a bit of accommodation heading toward a neutral pace. i see that as appropriate. we're not moving to aggressively as to put a break on continued improvement in the labor market. but i think that that's a
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prudent move, to move in a gradual way to remove accommodation with unemployment now, and not only i should say the unemployment rate, but i think any indicator of labor market performance and tightness that you could look at, whether it's household perceptions of the availability of jobs, difficulty that firms report in hiring workers, the rate at which workers are quitting their jobs, the rate of job openings. all of these indicators do signal a tight labor market. now, with inflation below 2%, i think it's appropriate that the labor market be that tight. but on the other hand, i think we want to avoid the risk. we want to keep the expansion on a sustainable path and avoid the risk that at some point we find ourselves in a situation where we have done nothing and then
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need to raise the funds rate so rapidly that we risk a recession. so moving to some extent in a timely way to remove accommodation with a strong economy and continued labor market strength, the committee believes is an appropriate management of risks. but we are attentive to the fact that inflation is running below our 2% objective, that we have faced that situation now for a long time, and it's really quite essential that we put in place policies that will succeed in moving inflation back to our 2% objective. and it's a symmetric objective, so that's a -- that's a risk that we face as well. the committee believes we have conditions in place for inflation to move up. but that's also a risk. and those things point i think
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to a gradual pace of reducing accommodation. nancy marshall from "marketplace." recently a group of economists sent the fed a letter earlier this month disagreeing with your 2% inflation target and saying they would like the economy to run a bit hotter. they don't think the labor market is so tight. you say you're committed to the 2% target. but what do you say to them? chair yellen: so, at the time that we adopted the 2% targets we had aack in 2012, very thorough discussion of the factors that should determine what our inflation objective should be. and, you know, i believe that was a well-thought-out decision. now, at the moment we're highly focused on trying to achieve our 2% objective.
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and we recognize the fact that inflation has been running below, and it's essential for us to move inflation back to that objective. now, we've learned a lot in the meantime. and assessments of the level of the neutral likely level currently and going forward of the neutral federal funds rate have changed and are quite a bit lower than they stood in 2012 or earlier years. and that means that the economy is -- has the potential where policy could be constrained by the zero lower bound more frequently than the time that we adopted our 2% objective. so it's that recognition that causes people to think we might be better off with a higher inflation objective.
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and that's an important set. this is one of our most critical decisions. and one we are attentive to evidence, and outside thinking. it's one that we will be reconsidering at some future time. and it's important for our decisions to be informed by a wide range of views and research, which is ongoing inside and outside the fed. but a reconsideration of that objective needs to take account not only of benefits of a higher -- potential benefits of a higher inflation target, but also the potential costs that could be associated with it. it needs to be a balanced assessment. but i would say that this is one of the most important questions facing monetary policy around the world in the future. and we very much look forward to seeing research by economists
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that will help inform our future decisions on this. lee with "thetom l.a. times." the federal funds rate at 3%, and the markets are expecting 2%. how big of a concern is that gap in your mind? what are the reasons for the disconnect? and, you know, what are the implications and the risks for the real economy? chair yellen: so, let me first say, it's not straightforward to determine exactly what expectations are embodied in market prices, because there are term premia that affect these rates. and they may not really be as low as one would infer from a straight read.
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that said, in part expectations reflect estimates of what the neutral federal funds rate is, and how it's likely to evolve over time. and views have changed about that over time, and there is a good deal of uncertainty about it. so we've recently put out charts that try to show what the range of uncertainty is around our path for the federal fund rate, especially as one goes further out, there is a good deal of uncertainty, and that reflects all the shocks that can affect the evolution of the economy, and also the fact, we're quite uncertain ourselves about what the likely -- what the evolution will be of the neutral federal funds rate. so we do try to write that down and provide the public with
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information about our current expectations. and the median now stands at around 3%. but we have uncertainty about that. many of my colleagues and i think that the current neutral level is lower than that. and as i said in my opening statement, the fed funds rate path reflects an expectation that that neutral rate will be moving up some in future years. but that remains uncertain. and i think that's something that market participants are trying to assess. and we will be as well. >> [indiscernible] the difference in the gap between the expectation and what the fed's projections are for longer run federal funds rate? chair yellen: our expectations are little changed. i mean, the projections we released today are essentially
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identical to those, and i think the market is aware of the views of participants and is assessing evidence itself to form their own views. and it's important that the market take an independent look, and that we get to understand and see how market participants are interpreting evidence on the evolution of the economy. so, it's not an unhealthy thing to have such a gap. and as i just said, our own views are not set in stone, but are likely as well to evolve over time. "associated press." back in 2013, when the fed first raised the possibility of trimming its bond purchases, it created a bit of turbulence in
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financial markets. a cause you -- it caused you to recess your communication of that process. this trimming of the bond holdings, the financial markets seem to be taking that in a better way. if down the road, though, you see that there is more of an adverse reaction, are you planning to make any changes, perhaps change the caps to $30 billion in the $20 billion caps, and how do you assess how you'll handle that going forward? chair yellen: so, we have indicated for quite some time, i guess since our -- at least since our 2014 normalization principles, that we wanted to reduce our balance sheet in a gradual and predictable way. and we have tried systematically to communicate more about how we would do that as our plans have evolved.
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and today's announcement is another step in providing further details about how we plan to proceed so that when this plan does go into effect, no one is taken by surprise and market participants understand how this will work. i think that we -- the plan is one that is consciously intended to avoid creating market strains, and to allow the market to adjust to a very gradual and predictable plan. my hope and expectation is that when we decide to go forward with this plan, that there will be very little reaction to it, that it's clear how we intend to proceed, and that this is something that will just run quietly in the background over a
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number of years, leading to a reduction in the size of our sheet and in the outstanding stock of reserves, and that it's something that the committee will not be reconsidering from time to time. we think this is a workable plan, and it will -- as one of my colleagues, president hartford described it, it will be like watching paint dry, that this will just be something that runs quietly in the background. so that's my expectation and our intention. look, of course, if it turns out that there is a surprise and a substantial reaction, that is something we would have to take into account in deciding on the appropriate stance of policy. >> michael aki from bloomberg television and radio. a couple of comments from administration officials.
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i wanted to get your reaction. the treasury secretary and others have suggested that dodd frank regulation, the way it's been applied, have restricted credit growth in the economy. banks are not making loans that they otherwise would, and that has slowed growth. do you agree with that? and if you get a new vice chair of supervision who wanted to ease up on regulation, would you go along with that? also, i wanted to ask you, it's been reported the president has congratulated you on being a low interest person. would you agree with that characterization of your philosophy? chair yellen: well, with respect to the impact of credit conditions and bank regulation and slow growth, i've previously in testifying indicated that i don't think that our regulations have played an important role, at least broadly speaking, in impeding credit growth and the growth of the economy.
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and i've pointed in the past to a number of statistics suggesting that credit growth continues to be healthy, including among smaller community banks that are most concerned with regulatory burden. i think when banks are undercapitalized and weak, that impedes credit growth. and when banks are strong, they're in a much better position to lend. so that's been a view that i've stated previously. now, in terms of regulation, the treasury recently issued on monday a detailed report. and that's quite a complicated document with lots of recommendations in it. i haven't had a chance to review it thoroughly. so i don't want to comment on too many details. but i would say it underscores the importance of capital
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liquidity, stress testing, and resolution planning, in having a safe and sound banking system, which are views that i and my colleagues have long espoused. regulatory burden, when it's possible to ease it, and a good deal of the treasury report is focused on regulatory burden, that's something that all regulators should be looking to do. we strongly believe in the importance of tailoring our regulation to the size and complexity of institutions, of finding ways to relieve burden for community banks. we have been focused and had a number of initiatives already in that direction, looking for ways, for example, to simplify capital requirements for
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community banks. and we'll continue in that direction and in that sense in those areas certainly share the views expressed in the treasury report. so there are a number of areas and suggestions where our thinking the lines, well, there's probably some areas where we're likely to have differences. but, you know, quite a number of areas where we're, you know, likely to be able to -- and already are taking actions that are consistent with those recommendations. >> reporter: the characterization of you as a low interest rate person? >> well, i have felt that it's been appropriate for interest rates to remain low for a very long time.
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we are in the process of, as the economy strengthens, normalizing interest rates. but certainly we've had a lot of years in which interest rates have been low. i thought it was necessary to support the economy at that time and was strongly in favor of those policies. >> reporter: thank you, karen marachek with "market news international." today you outlined the plan over reinvestments. you stopped short of saying when it would be implemented, except to say this year, and adding that depended on how the economy evolved. can you tell us why you decided not to go ahead with it today? are there certain conditions you're looking for? as a second question, do you think that you could raise rates and begin implementation of the plan at the same time? thank you.
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>> so we have tried as meticulously as we can to provide advance warning to markets about how we would go about doing this so that market participants can prepare. and today's announcement is another step in that process. so we certainly wanted to get this information out before we actually undertake the beginning of this plan. and, you know, as the statement says, we've made no definite decision on the timing of the plan. but the timing of initiating the plan, but if the economy evolves in line with our expectations, which we will be watching, always are, we could put this into effect relatively soon. you asked about whether or not we would do that and raise rates at the same meeting. and i would say we've made no decision about that. and it really hinges on the outlook and our assessment of conditions.
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>> reporter: hi. victoria guido with politico. you mentioned the treasury report. how much weight do you give those recommendations in considering potential regulatory changes moving forward? also more specifically, one of the recommendations relates to the volcker rule. i know you've said in the past it might be a good idea to reduce the burden on community banks. but it also talks about potentially exempting banks with trading assets and liabilities above a certain level. and i was wondering if you think that's an idea that's worth exploring, that might be a good idea. >> so we have previously suggested exempting community banks, smaller banks, entirely from the rule. and a number of my colleagues have spoken about the volcker rule rule. implementation of it is frankly
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the reportndor a' restriction on proprietary trading. so in that sense, it endorses the main objective of the volcker rule, which i was pleased to see. but on implementation, it's true that the rules wer in pt reflecting the way the legislation is written, were i think necessarily complex, but we do have some ideas for howe might simplify the rule. and certainly it's something we're quite open to looking at.
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-- a safety and soundness of creating systemic risks that something that all regulators .hould want to do coming back and looking at what we have created, burdens and ways in which we can simplify to reduce, that is an objective that is core to the treasury review. , whilevery sympathetic we may not agree on every detail, the suggestions are something we will pay attention to. already on our own list of
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things we should be view. >> in light of the plans to trim the balance sheet better this year, what have you learned about key we and buying policies as a tool for monetary policies? engaging in that skill before. a lot of fears that it was going to create hyperinflation. in light of cd is a tool for the future, it might come back again, what had -- in light of qe as a tool for the future, it might come back again, what have you learned? andtaff in the reserve economists have done a great deal of work trying to evaluate qe. the general conclusion is it has somed in that it has put
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downward pressure on longer-term interest rates, so-called term premiums embedded in longer-term interest rates. there is disagreement among economists about exactly how large those effects are and it is something that is difficult , it isdown but obviously not caused runaway inflation. i do remember when people were free that that would happen -- were afraid that that would happen. even with a large balance sheet, we intend to shrink our balance sheet now but even with the large balance sheet, we've maintain the ability to move the funds rate and said it is appropriate to the needs of the economy. so i have learned -- i think we have learned that it works. it is a valuable part of the
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toolkit. it is something that if we were to encounter an episode in the future of extreme weakness where i have said we want the fed funds rate and movements in short-term industry, that is our policy:.ber one main if we were to hit the zero lower bound and constrained in our use of that tool, the balance sheet policies and forward guidance didn't provide it. based on the evidence on how they work which will remain a part of our toolkit and we have said in the bullets released -- we would consider going forward. d have a natural limit on how
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high you might want to push the balance sheet? >> we have had no discussion on that issue. our focus now is on getting it back to a more normal size. i would say the use of qe in the united states relative to the size of our economy is not as high as it has been in some other countries that have employed it. that is something we haven't discussed. >> patrick, cnn. it is workforce developing week at the white house and you highlighted several job-training programs in your speech in march. the president's budget has a 40% cut to job training programs. what is your response to the budget cuts to job-training programs even though big's -- they expect to expand apprenticeships are needed at -- jobs where they're finding
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difficulty identifying workers with the appropriate skills. >> i'm not going to comment on the president budget. these programs can be taken at any different level. i have seen many nonprofits and state and local authorities put in place programs that look to .e to be successful i do think we have a tight labor market. one where employers have jobs finding difficulty identifying workers with the appropriate skills. in my own discussions with businesses, what i hear more of and this is something i think is a great aspect of the tight labor market, firms are spending more on training. trying to -- even if they can't hire workers with ideal skills are training people to fill jobs
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that they have available. i hear from ceos of smaller firms is they don't have the ability to launch such programs. they would really very much like to participate with community colleges or nonprofits to see such programs launched, and have jobs that people could fill if they receive the appropriate training. i do think that this is an important area, especially given the pressures that have existed for a long time, downward pressure on wages and job opportunities, especially for those with skills. i think this is something that deserves priority. >> thank you.
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